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INVENTORY MANAGEMENT

ABC analysis divides an organizations on-hand inventory into three classes based upon

 unit price.
 annual dollar volume.
 the number of units on hand.
 annual demand.

If the production rate in an economic production lot size model is very much larger than the consumption rate, the results are practically the same for economic production lot size and EOQ.

 True
 False

The difference(s) between the basic EOQ model and the production order quantity model is (are) that

 A. the EOQ model does not require the assumption of known, constant lead time.
 the production order quantity model does not require the assumption of known, constant demand.
 the production order quantity model does not require the assumption of instantaneous delivery.
 there are no holding costs in the production order quantity model.

In the basic fixed-order quantity model, if annual demand doubles, the effect on the Optimal Order Quantity (EOQ) is:

 it is about 70% of its previous amount
 decreases by a factor of 2
 it is half its previous amount
 it doubles
 it increases by about 40%

Which of the following inventory systems would be most appropriate in controlling many items ordered from the same vendor?

 Fixed Order Quantity System
 Materials Requirements Planning System
 Fixed Time Period System
 One Period Inventory Model Using Marginal Analysis

Policies based on ABC analysis might include investing

 more in inventory security for C items.
 extra care in forecasting for C items.
 the most time and effort verifying the accuracy of records for B items.
 more in supplier development for A items.

A firm producing medical equipment to customer specifications is most likely using a

 assemble-to-order strategy.
 make-to-stock strategy.
 make-to-order strategy.
 mass production strategy.

Extra units that are held in inventory to reduce stockouts are called

 reorder point.
 just-in-time inventory.
 safety stock.
 demand variance.

Which of the following is NOT a type of inventory?

 raw material
 finished goods
 MRP
 work-in-process

What items do students typically buy on an ROP basis?

 gasoline for car
 textbooks
 computer software
 wedding gifts
 bran muffins

Inventory record accuracy would be decreased by

 cycle counting.
 increasing stockroom accessibility.
 ABC analysis.
 reorder points.

The goal of ABC analysis is to

 estimate average volume per dollar value.
 estimate dollar value per pound.
 determine the profitability of items.
 to identify the A items for better inventory control.

Which one of the following statements is best?

 A fixed interval system lends itself more to quantity discounts than does a ROP system.
 A fixed interval system requires more safety stock than a ROP system.
 A fixed interval system requires more administrative control and computer support than does a ROP sy
 In a fixed interval system, the value of Q is kept the same from one cycle to another.

In the basic Q model, if the lead time doubles, the EOQ will:

 decrease by half
 remain the same
 double
 increase, but not double
 none of the above

One use of inventory is

 to provide a hedge against inflation.
 to tightly link a firm s production with its customer s demand.
 to tightly link production and distribution processes.
 to ensure that item cost is maximized.

In a two-bin inventory system, the amount contained in the second bin is equal to the:

 amount in the first bin
 ROP
 safety stock
 optimum stocking level
 EOQ

Space considerations are not included in any of the economic ordering models.

 False
 True

Which one of the following statements concerning the economic order quantity (EOQ) model is TRUE?

 Partial receipts are allowed.
 Uncertainty in leadtime may not exist.
 Quantity discounts can occur and taken into account in the total cost calculations.
 Annual holding cost, annual purchasing cost and annual delivery costs are the relevant costs in the

The Basic EOQ model ignores:

 A items
 Holding costs
 B and C items
 Ordering costs
 Purchasing costs

Reorder point models are primarily used for independent demand items.

 False
 True

If both the lead time and daily demand are constant (no variation), the ROP is equal to:

 Expected demand minus safety stock.
 Daily demand times lead time.
 Expected demand plus safety stock.
 Safety stock

Monitoring the temperature of tomatoes during shipment would best be done using:

 Universal Product Codes (UPC)
 GPS
 Bar codes.
 RFID tags
 ROP

With the quantity-discount model, an order level might not be at a minimum point of a total cost curve.

 False
 True

The two most important inventory-based questions answered by the typical inventory model are

 how many of an item to order and what is the cost of this order.
 when to place an order and what is the cost of the order.
 how many of an item to order and with whom the order should be placed.
 when to place an order and how many of an item to order.

For a company that manufactures most of its products as standards, more inventory should be placed

 within the plant as work-in-process.
 closer to the customer.
 close to suppliers.
 equally distributed between the plants and warehouses.

Fixed-order quantity models are:

 Fixed for a specified time period
 Made up of a variable order size
 Time triggered
 Event triggered

A system that triggers ordering on a uniform time basis is called a

 reorder point system.
 fixed-period system.
 EOQ.
 fixed-quantity system.

Most inventory models are made based on:

 Profit maximization
 Minimizing lead time
 Minimizing setup times
 Cost minimization
 Optimum influence on demand